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Kurt Shuler bio

Kurt Shuler Arteris Intel TI MIT USAFAKurt Shuler is the VP of marketing at Arteris. 

He has held senior roles at Intel, Texas Instruments, ARC International and two startups, Virtio and Tenison. Before working in high technology, Kurt flew as an air commando in the U.S. Air Force Special Operations Forces.

Kurt earned a B.S. in Aeronautical Engineering from the U.S. Air Force Academy and an MBA from the MIT Sloan School of Management.

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The Semiconductor Industry Needs an IP Switzerland

  
  
  

Arteris is IP Switzerland

It’s official: The great IP land grab has begun.

The process actually has been taking place gradually, but has accelerated with Imagination Technologies’ acquisition of MIPS last year and, most recently, Cadence’s acquisition of Tensilica. For makers of semiconductors, four competing IP behemoths are emerging after years of fragmentation within the semiconductor IP industry.

The four big IP players are now ARM, Synopsys, Imagination and Cadence.

This is certainly not a bad thing for the remaining non-public IP companies. The $350M offer by Cadence for Tensilica probably works out to about a 7x to 8x multiplier over annual revenues, which is a very healthy premium. Unlike some previous acquisitions where a company was purchased for a small premium, such as Virage Logic’s 2009 acquisition of ARC International, the magnitude of the Cadence/Tensilica deal demonstrates the economic value and importance of design IP in the semiconductor value chain.

On the flip side, semiconductor makers may feel a little nervous when they look at the industry concentration of semiconductor design IP vendors. The most recent data from Gartner’s annual report, “Market Share: Semiconductor Design Intellectual Property, Worldwide, 2012,” shows that the new acquisitions have resulted in four companies providing nearly 65% of all semiconductor IP licensed in 2012. This concentration is expected to increase as Cadence and others continue to pursue IP acquisition strategies.

Arteris is #9 semiconductor design IP vendor by License revenue

The good thing is that semiconductor makers need not feel “locked-in” to any one vendor or ecosystem. There are already technologies and companies whose primary purpose is to link together various IP islands, no matter what is the transaction protocol or who is the IP vendor. These companies enable semiconductor vendors to choose “the best IP for the job,” helping SoC design teams assemble and verify their chips at an increasingly fast pace.

I’m lucky enough to work for one of these companies. I used to define our benefits as our technology “speeds and feeds,” or the way its use helps our customers get to market sooner. But from speaking with customers it is clear that one of the primary benefits is more simple and basic: We help make it possible for design teams to ensure that, no matter where they purchase their IP, they can easily integrate it. And IP vendors benefit from this same phenomenon. We help reduce the friction and pain of SoC assembly, helping both semiconductor designers and IP vendors get their products to market sooner.

It’s good to be living in IP Switzerland.

—Kurt Shuler is vice president of marketing at Arteris.

As featured in: Arteris System Level Design

Comments

Gartner reports overall IP revenue is $2.14B. You show IP licensing revenue is $1.07. The remaining is coming from Royalties?
Posted @ Monday, April 29, 2013 11:49 AM by mv
Yes, the chart is License revenue only. The remainder is Royalties and Support and Maintenance revenue. 
 
A growing company will have much more License revenue than royalty revenue. An example is Arteris. 
 
A mature company will have about a 50-50 mix of License and Royalty revenue. An example is ARM. 
 
A dying company will have high Royalty revenue but low License revenue.
Posted @ Monday, April 29, 2013 11:52 AM by Kurt Shuler
Kurtz, I'm not sure if I'm missing a part of this article, but there's no mention in it of the Switzerland angle. Could you explain - sorry I'm struggling to see how neutrality works apart from companies buying IP being ambivalent about who they buy IP off as long as it works as they want it (but this doesn't work due to market domination in many cases - ARM in mobile CPU, Imagination in mobile graphics).  
 
Also I would suggest that as long as licensing is increasing then the proportion of licensing to royalty revenue matters less in terms of a company's growth/death profile. Eg Imagination has low licensing now compared to royalty incomes but licensing is growing (as are the number of chips in design, development and production) so while the licensing/royalty mix will get 'worse' over time the company will still be on a healthy growth trajectory.
Posted @ Tuesday, April 30, 2013 1:08 AM by Ken
Ken, 
Thanks for the questions! I love this industry and learning about (and debating) its economics. 
 
For the first point regarding "Switzerland", the reality is that it is hard for SoC makers to get IP from different vendors to interoperate. This can be due to transaction protocols, proprietary sideband signaling, and many other factors. Having a neutral player provide the on-chip interconnect allows an SoC maker to more easily integrate IP from various vendors, and worry less about who that vendor is. The marketer in me would love to say we make it "plug-and-play", but I'll fight the urge! 
 
I think your statement regarding licensing, with Imagination as an example, is correct. A financial analyst will have to look at an individual company's business model to determine what the correct mix of license and royalty revenue is for a healthy business. For Imagination, my understanding is that they charge more in royalties than other IP players like ARM. So their "healthy" or steady state license/royalty mix will be different that ARM's. 
 
I will say that one should beware of dealing with companies that have declining license revenue but large amounts of royalties. The reason is because this may be an indication that current licensing business is drying up, and the company is living off of past success. A potential investor, or potential licensee, should ask lots of questions if they see this.
Posted @ Wednesday, May 01, 2013 8:05 PM by Kurt Shuler
Kurt, Where did you come up with this chart? The Gartner chart in eetimes (http://www.eetimes.com/design/eda-design/4413365/Synopsys-Imagination-make-gains-in-semi-IP-ranking) does not state Arteris as number 9. Why dilute this article with petty serving lies?
Posted @ Wednesday, May 08, 2013 1:15 AM by Hayssam Balach
Hayssam, 
 
The chart is taken directly from Gartner report ID:G00246556 published 13 March 2013 titled, "Market Share: Semiconductor Design Intellectual Property, Worldwide, 2012" by Gartner analysts Ganesh Ramamoorthy, Masatsune Yamaji and Satish R.M. 
 
Here is the direct line for you to download the report: <a>www.gartner.com/id=2369015 
 
The table above is Table 4-2 titled "Semiconductor Design IP License Revenue, Worldwide, 2011 and 2012 (Millions of Dollars)". The table is LICENSE revenue, not total revenue, and I explain that in the article above. 
 
Best regards, 
Kurt 
Posted @ Wednesday, May 08, 2013 11:58 AM by Kurt Shuler
Hayssam, 
It was great to speak with you yesterday. Best of luck in Dubai. I've always wanted to visit there! 
Kurt
Posted @ Friday, May 10, 2013 2:55 PM by Kurt Shuler
Same here Kurt and sorry again for not checking the rest of the comments before posting mine. Let me know when you are in Dubai.
Posted @ Friday, May 10, 2013 11:44 PM by Hayssam
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